Dick’s Sporting Goods

The Biggest Power Player Is Shaking Things Up in 2019.
The Big Boys: Adidas Boost products with a big presence. Seen on recent visit to Dick’s Sporting Goods in NY.

HEADQUARTERS
Coraopolis, PA

DIGITAL FOOTPRINT
Our quick scan of Dick’s Sporting Goods’ digital presence: Visiting the homepage in mid-March, NCAA basketball jerseys, Yeti coolers and baseball and softball gear all take center stage. Fifty percent off winter outerwear is promoted and shipping is free for orders of $49 and up. Social media channels feature aspirational photos and product promotions. Openings of new in-store batting cages are promoted on Facebook. Twitter feed is fun and ranges from polls to instructional videos to sharing sports news.

SOCIAL FOLLOWING
Twitter: 385K
Instagram: 371K
Facebook: 5.6M

IN-STORE REPORT
We visited Dick’s Sporting Goods in Garden City, NY.
Top takeaways: Well organized, well-merchandised, two-level store in upscale Long Island suburb. Golf section on the right stands out as we enter with prominent Titleist display. In mid-March winter jackets are discounted, with The North Face featured heavily. Strong apparel display in center of the store with brand shop-in-shops. Jordan display highlighting white on white apparel and footwear is a standout. Camping and outdoor gear is prominent on the left side of store. Yeti strongly featured. Colorful baseball bat display, Easton and Rawlings catch our attention. Footwear wall takes up entire side of store. Nike, Jordan, Adidas and Brooks are all showcased in footwear.

The Rundown: Dick’s Sporting Goods is the biggest business on our list, ending 2018 with 729 of its namesake Dick’s Sporting Goods stores across 47 states after opening 19 doors, relocating four and closing six. Annual sales were $8.45 billion in 2018, down 1.8 percent year-over-year. Subsidiaries include Golf Galaxy (94 locations) and Field & Stream (35 locations). In a consolidating market, following the demise of Sports Authority and others, Dick’s finds itself in the position of being the largest full-line sporting goods chain in the continental U.S. But given the rise of Amazon, ongoing traffic declines in traditional malls and the experiential and product immediacy desires of consumers, Dick’s is altering its game plan for 2019 and beyond.

Background: The company was founded as a fishing and tackle store in Binghamton, NY in 1948 by Richard Stack and was purchased by his children including current CEO Edward Stack in the early 1980s when it was still a small New York-based operation. Dick’s went public in 2002 and has grown into the biggest sporting goods player in the U.S. in the decade since.

Major 2018 Developments: Dick’s tenor as a sporting goods retailer and business member in the community took a dramatic shift after the Valentine’s Day shootings of 17 students at Florida’s Parkland High School. CEO Ed Stack took a stand against gun violence after the tragedy and announced new firearms policies (no more assault-style gun/modern sporting rifle sales) at the retailer. Similar policies were subsequently announced by Walmart and Kroger-owned Fred Meyer. Despite criticism from the National Shooting Sports Federation, customers and some Dick’s employees, Stack never wavered despite the harsh reality of lost customers and lost sales. The incident appeared to be the start of Dick’s closer look at its low-margin hunting business. Months later, the chain said it would exit the category at 10 locations. Earlier this month, Stack said hunt would be removed from another 125 doors by Back-to-School with the space re-allocated to other product segments. “It will be replaced with merchandise categories that can drive growth, each based on the needs of that particular market,” explained Stack.

2019 Store Opening Plan: Dick’s intends to add seven stores in 2019 as it waits on real estate deals to open up due to closures from the likes of J.C. Penney and Sears. Its Golf Galaxy banner, which ended FY18 with 94 locations across 32 states, will open two stores this year. Dick’s also operated 35 Field & Stream stores, across 16 states covering 1.7 million sq. ft., at the end of 2018. Senior management says no decisions on the future of Field & Stream have been made yet, although no new locations will open this year. Field & Stream was said to be “cash flow positive” and “not a drain on the company” at FY18 end.

Merchandise Reset: A steadier stream of athletic apparel and footwear from the likes of Nike and Adidas will become even more prominent at Dick’s as hunt and electronics are eliminated or de-emphasized at stores. And despite recent soft times for the brand, senior management at Dick’s insists it’s “enthusiastic” about its Under Armour business going forward. There will also be greater emphasis on team sports, golf and private label soft good offerings.

Own Brands: Private brand sales grew to approximately 14 percent of annual revenues last year, an implied $1.18 billion, and Dick’s has its eyes on hitting the $2-billion mark. “In 2019, we expect to continue to strengthen as our private brands will play an important role in our space allocation and assortment strategies,” said Stack. Part of that target will be reached through the expansion of its Calia brand, endorsed by Carrie Underwood, which is being expanded to 80 doors, and a new, as yet unnamed, entry price-point athletic apparel label being introduced in time for Back-To-School.

Omnichannel Experience: “We remain focused on building the best omnichannel experience in sporting goods,” said Dick’s president Lauren Hobart. “We are increasing our investments in the store experience, e-commerce fulfillment and technology.”

Fully realizing it needs to keep up with customer demands and Amazon’s capabilities, Dick’s intends to invest $15 million in e-commerce fulfillment in 2019. The biggest component of the spend will be two distribution centers, in Binghamton, NY and California, forecast to open in Q3. Robotics will be utilized in the East Coast fulfillment center, which is expected to have the capability of delivering orders within one business day, to accelerate automation and lower labor costs. Last Q3, the retailer expanded a Buy Online, Pick Up In Store locker test at 10 locations and a curbside order pickup program at select stores. Both services may be expanded this year. Dick’s e-commerce sales rose 17 percent in FY18 with final period e-commerce sales increasing 13 percent. Dick’s intends to improve the integration of its GameChanger app to attract more baseball players of all levels into its stores.

The In-Store Experience: Dick’s has begun making the in-store experience a priority and it will continue to do so in 2019. Already, 150 HitTrax-technology-focused batting cages have been installed in 150 stores. “This fun and interactive experience allows our baseball and softball athletes to determine the best bat for them by testing and measuring their launch angle, exit velocity and distance,” explained Stack. “The strong engagement and response from our athletes led us to expand this test.”

Rumor has it that an experiential merchandising area for soccer may be on the drawing board, too. Senior management says the retailer will spend upwards of $35 million this year on enhancing in-store experiences.

“Enhancing the athlete experience in our stores is critical for our long-term growth, as our stores generate approximately 80 percent of our total revenue,” said Stack. “We will continue to optimize our assortment, reallocate floor space to regionally relevant and growing categories and make our stores more experiential. We tested several initiatives last year and have been pleased with the early response from our athletes.”